May 11, 2011

Second-Tier Spotlight: Kunming Quietly Becoming A Luxury Brand Magnet

Louis Vuitton’s Gingko Center Flagship Is Largest In Southwest China

Louis Vuitton's new Kunming flagship will be its largest in southwest China

Louis Vuitton's new Kunming flagship will be its largest in southwest China

Jing Daily’s ongoing “Second-Tier Spotlight” series looks at some of the key trends shaping China’s provincial capitals, often referred to as the country’s “second-tier” cities. Previously in the series, we’ve highlighted Xi’an’s surprisingly young luxury consumers, a “Goldfinger”-worthy publicity stunt in Changsha, jade fever in Qingdao, and Shenyang’s love for second-hand shops. Today, we turn to Kunming, capital city of southwest China’s Yunnan province, an area traditionally popular for its tourism and natural beauty.

Once-sleepy Kunming — long a stopping-over point for itinerant backpackers — has quietly become one of the most lucrative luxury markets in southwest China. In recent years, brands like Cartier, Max Mara and Burberry have set up shop in fast-growing Kunming, which has benefited from increasing cross-border trade with neighboring Vietnam, Laos and Myanmar (Burma). Considering the city’s Gingko Center mall recorded a respectable 2 billion yuan (US$308 million) in sales last year, and Kunming has become a destination for villa-buying Chinese celebrities, expansion into Yunnan’s capital is probably a smart move.

To get a temperature reading of a given Chinese city’s luxury market, a good indicator is always a Louis Vuitton flagship, and soon Kunming will be home to the largest LV flagship in all of southwestern China. Since LVMH maintains strict requirements as to where it chooses to invest based, in no small part, on a city’s spending power, a glittering Louis Vuitton flagship tends to be a dead giveaway that a given city has “made it,” at least in raw economic terms. While Kunming’s per capita income remains far lower than wealthier coastal cities, with annual urban income in Kunming averaging 5,726 yuan (US$882) in 2010, around half that of their counterparts in Beijing, demand clearly exists for high-end goods. Between 2009-2010, Kunming’s Gingko Center mall saw revenue increase by 500 million yuan (US$77 million).

So who are these outliers? These consumers who can afford to drop thousands of dollars in a province where rural per capita GDP amounts to only around $400 a year? This week, Xinhua speaks to the general manager of Kunming’s Gingko Center mall to find out who the city’s luxury consumers are, what they’re buying, and why Louis Vuitton chose Kunming as the destination for its largest store in southwest China. Translation by Jing Daily team.

According a Gingko Center analyst, current hotspots in Kunming’s luxury consumer market are cosmetics, designer apparel, leather goods, watches, jewelry and other personal items. As the analyst added, “Soon, luxury investment in Kunming will shift towards real estate, red wine, automobiles, contemporary art and other areas.” Luxury watches are representative of Kunming’s luxury market. At Gingko Center, all of the world’s top luxury watch brands are sold, with some models costing over one million yuan.

Who are Kunming’s luxury consumers? As Mr. Wei, manager of Gingko Center, explained, currently Kunming’s luxury consumers are mostly split between two types. One type is business owners and higher-level managers; the other is high-income, fashion-savvy white collar workers and some freelancers. Split up by age, most luxury consumers in Kunming are either between the ages of 28-35 or over the age of 40, and they’re getting younger.

As for the reason Louis Vuitton chose Kunming to set up a lavish flagship in southwest China, manager Wei said that Kunming is a stylish city, and that several years of market development has fostered a growing number of local consumers who care about quality and cultural heritage. For their part, luxury brands now recognize the spending power of wealthy Kunming residents.

As we’ve seen in other second-tier cities, where wealthy consumers have already bought their luxury watches and stocked up their wardrobes with high-end brands, watch for Kunming to become a hot market for wine, jade and art collecting. As Xinhua points out, wine is likely to become the first big new investment area in Kunming, as an ever-growing number of wine stores look to procure popular brands like Chateau Lafite for their clientele. As one wine store owner recently said, a bottle of Lafite now retails for around 20,000 yuan (US$3,080) in Kunming, and “it’s not uncommon for people to drink more than 10,000 yuan worth of red wine at dinner.”

Cosmetics / Fashion / Travel & Leisure
Tag: chateau lafite, flagship, jade, kunming... , More
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